Question

Keyser Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	173
Units in beginning inventory		1,450
Units produced		9,350
Units sold		9,450
Units in ending inventory		1,350

Variable costs per unit:
Direct materials	$	39
Direct labor	$	56
Variable manufacturing overhead	$	20
Variable selling and administrative expense	$	30
Fixed costs:
Fixed manufacturing overhead	$	74,800
Fixed selling and administrative expense	$	167,200

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

What is the net operating income for the month under variable costing?

$21,800

$22,600

$5,100

$34,100

Answer 1

Particulars	Calculation	Amount
Sales	9450x173	1634850
Less: Cost of goods sold		(1086750)
Opening stock	1450x115	166750
Add: production	9350x115	1075250
Less: Closing stock	1350x115	(155250)
Gross Contribution		548100
Less: Variable selling expenses	9450x30	(283500)
Contribution		264600
Less: Fixed cost	74800+167200	(242000)
Net operating profit		22600

Stock is valued at Variable manufacturing cost i.e., materials + labour + Variable Manufacturing Overheads = 39+56+20 = 115

So the net operating income is $22,600 (Option B)